by Christopher Westley
Ludwig Von Mises Institute
Published June 14, 2004
Perhaps you have heard that the bureaucrats running the
Milwaukee Metropolitan Sewerage District recently dumped
4.6 billion gallons of raw sewage into Lake Michigan along
the Wisconsin coast. What's more, they did it as a matter
That you probably haven't heard about this scandal says
much about the sycophantic relationship between the public
sector and the so-called free press in this first decade
of the 21st century, showing that press coverage is
lacking in other areas than simply its coverage of Iraq.
It also indicates much about the degree to which the public
sector is held to a lower standard than the private sector,
a relation which is true, to varying degrees, throughout
the United States, but especially in that birthplace of
the Progressive Era, the Peoples Republic of Wisconsin.
I know about this scandal because of a recent trip to
that state. You can't walk along the lake there without
covering your nose and wondering if you are endangering
your health. The beaches along the lakefrontóalways a
popular destination during Memorial Day weekendówere closed.
From what I could tell, the locals are mad as hell about
the situation and are completely unable to do anything
about it, so entrenched are the perpetrators of this crime.
How could this happen? The answer is a textbook case
that could have fit well as an appendix to Ludwig von
Several years ago, MMSD officials decided to upgrade
its sewer system by creating a deep tunnel that would
feed raw sewage with rain water to its water treatment
facilities. This $3 billion project took several years
to complete and was touted as the answer to an existing
sewage system that was so old that it had become an environmental
and health hazard.
The risk in choosing a single "deep tunnel"
system combining both types of wastewater lie in deciding
what to do when excessive rainwater stressed the system.
Many thought that a dual system of piping that separated
rain from waste water was a safer, if more expensive,
solution in an area of the country known for heavy spring
rains. Instead, the city decided on the deep tunnel with
the understanding that whenever the system reached capacity,
it would dump the overflow into the lake.
Although this was a policy that would probably have resulted
in criminal penalties if ever adopted by a private firm,
in hindsight, this was probably a tough call. One had
to balance the possibility of overflow with the short-term
savings of the deep tunnel (even though both options cost
in the billions of dollars). These decisions are much
more likely to be made correctly when those who are making
them stand to experience benefit or harm as a result.
And as should be no surprise to readers of Mises.org,
this is much more likely when such decisions are made
in the private sector. Mises writes about this phenomenon
in Bureaucracy (1983, pp. 50-52):
Bureaucratic management is management bound to comply
with detailed rules and regulations fixed by the authority
of a superior body. The task of the bureaucrat is to perform
what these rules and regulations order him to do. His
discretion to act according to his own best conviction
is seriously restricted by them.
. . . The objectives of public administration cannot
be measured in money terms and cannot be checked by accountancy
methods. . . . Within a business concern such things can
be left without hesitation to the discretion of the responsible
local manager. He will not spend more than necessary because
it is, as it were, his money; if he wastes the concern's
money, he jeopardizes the branch's profit and thereby
indirectly hurts his own interests. But it is another
matter with the local chief of a government agency. In
spending more money he can, very often at least, improve
the result of his conduct of affairs. Thrift must be imposed
on him by regimentation.
. . . In public administration there is no market price
for achievements. This makes it indispensable to operate
public offices according to principles entirely different
from those applied under the profit motive. . . . Bureaucratic
management is management of affairs which cannot be checked
by economic calculation.
So, where does this leave the city of Milwaukee? Currently,
there is much finger pointing going on. There are plans
to appoint a commission to study the scandal and learn
whatever is necessary so that it does not happen again.
Members of the state legislature are planning hearings.
These responses amount to predictable nonsense meant to
convey the message to an angry public that the system
can still work if only, yet again, it can be tweaked in
the right way.
But unfortunately, the system can be tweaked indefinitely,
and to no avail, as long as the incentive structure facing
decision makers is not changed. The likelihood of anyone
being held criminally responsible currently seems quite
low. No one has been fired. More tellingly, lawyers have
not exactly been lining up at the trial bar to file cases
against the perpetrators of this crime like they did shortly
after the oil spill of the Exxon Valdez in the 1980s.
Remember that? Back in 1989, a drunken ship captain named
Joseph Hazelwood literally fell asleep at the helm of
his oil tanker as it ran aground on Bligh Reef in Alaska's
Prince William Sound, causing about 11 million gallons
of oil to spill into the water. Exxon was found guilty
of negligence and a $5 billion verdict was issued against
it. Though the area harmed by the oil spill has largely
recovered, some adverse effects still linger.
The incident shows how private sector actors are held
responsible for their actions. This is as it should be.
One of the great benefits of private property is that
owners are held liable when property is used to damage
others. This promotes more responsible use of property
and causes it to be used in ways that are socially optimal.
There are other contrasts as well. Eleven million gallons
of oil spilled into a body of water connected to an ocean
is small potatoes compared to 4.6 billion gallons of raw
sewage dumped into a great lake. This makes the dichotomy
between the reactions to the Exxon Valdez and the smelly
mess in Milwaukee so glaring. (Do environmentalists only
condemn private sector perpetrators of ecological damage?)
And while the costs of Exxon's oil spill can easily be
assigned to the firm's shareholders, the costs of MMSD's
poor stewardship must be socialized among the taxpayers.
Currently, Milwaukee residents are being told that the
long term solution to its sewage problem lies in switching
to the dual piping system, another multi-billion dollar
project on top of the relatively new deep tunnel system.
Whether this system is implemented (as seems likely) or
not, taxpayers will continue to pay by either enduring
disgusting lake breezes or in increased taxes in order
to finance the improvements.
But they will pay. As someone with familial roots in
the Milwaukee area going back over 150 years, I find the
situation scandalous and discouraging, but hardly surprising.
The city of Milwaukee has long been dominated by left-liberal
political machines that have ruined what was once a great
city and have, over the last several decades, caused an
exodus to outlying suburbs and other states that pose
lesser threats to disposable incomes.
When I visit Milwaukee today, I am struck by the extent
to which it is living on the fumes of past accomplishments.
Unfortunately, those fumes have long turned sour. Much
stinks in Milwaukee, and it isn't just coming from the